CVRD buys AMCI Australia for $A863m

Brazil's CVRD, the world's biggest iron ore miner, bought coal
miner AMCI Holdings Australia on Monday in a $A835 million deal as
it seeks to become a major coal producer.

CVRD will also assume AMCI's debts of $A157 million.

AMCI, a private company based in Brisbane, has assets in two of
Australia's main coal mining areas - Hunter Valley, New South Wales
state, and Bowen Basin, Queensland state.

The deal will give CVRD the equivalent of 8 million tonnes of
coal production a year of mainly coking coal, and reserves of 103
million tonnes.

"CVRD is on the way to becoming one of the world's 10 largest
coal producers," Pedro Jose Rodrigues, CVRD's director of new
business development, told a news conference.

By 2010, CVRD aims to produce 30 million tonnes of coal from
AMCI's Australian assets as well as from Moatize in Mozambique and
Belvedere in Australia.

The deal must be approved by Australia's Foreign Investment
Review Board (FIRB), a process that normally takes about 40 days,
Rodrigues added.

"The acquisition of AMCI creates a strong platform to develop
CVRD's coal business and contributes to diversifying our product
portfolio," CVRD said in a statement.

The world coal market is estimated by CVRD at 5 billion tonnes,
including 700 million tonnes of seaborne trade. An estimated 80 per
cent of world demand is for thermal coal, and 20 per cent for
coking coal for the steel industry.

Most of CVRD's Australian coal will be destined for Asian
steelmakers, notably in India but also in South Korea and Japan,
Rodrigues said. About 80 per cent of the coal will be sold under
long-term contracts, he added.

"Australia has been on our radar screen for some time. It's
geology is similar to Brazil's and has excellent prospects for
coking coal," said Jose Lancaster, CVRD's director of nonferrous
metals.

He added that the Bowen Basin and Hunter Valley are "among the
best in the world."

A local analyst welcomed CVRD's Australian move.

"It's in line with CVRD's strategy to diversify around its core
(iron ore) business," said Cristiane Viana, analyst at Agora Senior
brokerage in Rio de Janeiro.

AMCI owns 61 per cent of Integra Coal Joint Venture, Hunter
Valley, New South Wales. It also owns 80 per cent of Carborough
Downs Joint Venture, central Queensland, which is ramping up for
full production in 2009/10.

AMCI has 50 per cent of Isaac Plains Joint Venture, central
Queensland, which should reach full capacity in 2009/10. It has 100
per cent of Broadlea Joint Venture, central Queensland.

CVRD will also take over AMCI's 30 coal exploration areas, which
have a potential 3 billion tonnes non-audited reserves.

CVRD's other coal assets include minority stakes in two Chinese
companies: Shandong Yankuang International Coking and Henan Longyu
Energy Resources.

CVRD is also finishing a feasibility study to develop the large
Moatize coal deposit in Mozambique, and a feasibility study of the
Belvedere deposit in the Bowen Basin, Queensland.